What is Law of Demand?
Let's find out Law of Demand meaning, definition in crypto, what is Law of Demand, and all other detailed facts.
Before diving into the term, it’s important to understand the basics of supply and demand.
Demand describes the readiness to pay a certain price for goods or services. Basic principles of demand revolve around the price of the commodity and personal preferences.
The quantity of consumers willing to pay a specific price for a product or service depends on various factors. The key factor is the price.
The Law of Demand describes how the increase in price influences the decrease in demand. The same logic can be applied to a reversed situation where a decrease in price influences the increase in demand.
To put it simply, a growing price of a commodity will make consumers buy less while a decreasing price of that same commodity will make consumers buy more.
A solid grasp of the Law of Demand greatly benefits anyone who’s making economic predictions.
The demand schedule is a key element in the equation. It represents the demanded quantity of a product or service at different prices per unit. There are two types of demand schedules:
- Individual demand schedule - the quantity of a product or service that an individual consumer is prepared to buy at a specific price and time;
- Market demand schedule - the quantity of a product or service that all consumers are prepared to buy at a specific price and time.
As we can see, within the Law of Demand, there is a strong relationship between price and demanded quantity.